State-owned HNA Group, which partly owns Hainan Airlines, is expected to get the approval in its protracted bid for CR Airways after the group's chairman agreed to take only 45 per cent of the Hong Kong company, instead of the original 60 per cent, sources said yesterday.

The decision by HNA chairman Chen Feng will effectively keep CR Airways' status as a Hong Kong-designated carrier, appeasing earlier government worries that the deal will put one of the city's airlines in foreign hands.

The local status will also allow CR Airways to continue to take advantage of bilateral aviation deals struck by Hong Kong.

Wilson Fung Wing-yip, deputy secretary of the Economic Development and Labour Bureau, which vets such deals, said his office had yet to approve the new proposal.

But sources said the bureau was satisfied with Mr Chen's offer, as resubmitted by CR Airways' sole shareholder, former chairman Robert Ip, and Peter Fung Yiu-fai, the managing director of Yu Ming Investments, which owns $140 million of the carrier's convertible bonds, redeemable in 2009.

Sources also said that since Mr Feng was not a Hong Kong citizen, he would be setting up a locally registered unit to hold the CR Airways stake. It was not clear how the new shareholdings will be structured.

'What concerned the government most was whether CR Airways will still be controlled and managed from within Hong Kong,' one of the sources said.

'After the acquisition has been approved, CR Airways will be able to apply for the right to fly to other primary Asian cities,' said an industry veteran. 'And it will probably be a threat to some of Hong Kong's existing carriers.'

With the financial backing of HNA, CR Airways three months ago agreed to buy 10 B787 Dreamliners and 30 Next Generation 737-800s worth about US$3 billion.